F3 - Assets And Related Topics

Question 1

Once Impairment has happened, The restoration of a carrying value for a long-lived asset is allowed when?

Answer 1

When an asset is held for disposal.

NOT when is held for use.

Question 2

Periodic inventory system equation

Answer 2

Beginning inventory + Purchases = Ending inventory + COGS

Question 3

What are the rules for F.O.B. (free on board) Shipping Point and F.O.B Destinations.

Answer 3

F.O.B Shipping Point - is when title passes to client when the goods leaves the seller’s location and the Shipping Cost is a cost to the buyer

F.O.B Destination is when the title is passed to the client when received by the buyer (client), and that the packaging, shipping, and handling are costs of seller.

Question 4

How to calculate low of cost or market?

Answer 4

Market ceiling -ALSO called NET REALIZABLE VALUE or Carrying value
= selling price - cost to complete and disposal

Market floor
= Market ceiling- normal profit margin

Replacement cost

The middle value of the three will be the low of cost or market.

Question 5

How to depreciate in Sum-of-year- digits method?

Formula?

Answer 5

1 cost of asset - salvage value = base

2 fomula S = “N * (N + 1)” / 2

Or add all the years example 4 years =
1+2+3+4=10

Depreciation 
Year 1 = 4/10 × base = Depreciation 
Year 2 = 3/10 × base = Depreciation
Year 3 = 2/10 × base = Depreciation
Year 4 = 1/10 × base = Depreciation

Question 6

How to depreciate in depletion method?

Answer 6

Compute REAL = Base
- R = Residual value 
\+ E = Extration/development cost
\+ A = Anticipated restoration cost
\+ L = Land purchase price 

Base / estimated recoverable units = _%

% * units removed or extrated = Depreciation

Question 7

LIFO

FIFO

represent

Answer 7

LIFO = low inventory. High COGS

FIFO = High inventory. Low COGS. Good in inflation and perpetual inventory.